Aluminium prices saw a sharp drop in the past one month and consequently, the continuous contract of aluminium on the Multi Commodity Exchange (MCX) fell after marking a high of ₹259.3 in mid-October. But the contract found support in the price band of ₹200-₹204 in early November and since then it has largely been moving in a sideways path.
Until the contract stays above the above-mentioned price band, the trend will remain bullish. Also, a rising trendline on the weekly chart coincides with this price band, making the support stronger. So, the contract may rebound from these levels. However, currently trading around ₹215, the aluminium futures face a hurdle at ₹217 and thus, the likelihood of a consolidation between ₹205 and ₹217 cannot be ruled out. Nevertheless, the price area of ₹200-₹204 being a significant one, the contract will most likely breakout of ₹217. Above ₹217, the nearest resistance levels can be seen at ₹225 and ₹235. But the resistance at ₹225 may not be able to stop the uptrend and the contract is likely to rally to ₹235.
Given the prevailing conditions, traders can stay on the sidelines and initiate fresh long positions on the aluminium futures on the MCX when it decisively breaches ₹217. Stop-loss can be place at ₹210 initially. When the contract moves above ₹225, revise the stop-loss up to ₹217. Since there can be a correction after the contract hitting ₹235, consider exiting the long positions at this level.
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